Bank of England, Federal Reserve are yet not ready to fade into the background, preferring to stay active for a while. Both stood on hold on rate and QE decisions. I’m going to break down BoE meeting with a trade on Pound you can read below.
So BoE made some remarks on surprises ahead related to Brexit and that the Bank will respond accordingly to them. Clearly no attempts to run ahead of themselves and setting policy in advance, rather reaction to what is happening. This “Data-Dependency” means that analyzing incoming economic data thoroughly can give you an edge at second-guessing BoE policy steps.
According to Carney, “If we do see a situation where there is faster growth and wages than we anticipated or spending doesn’t decelerate later in the year, one can anticipate there would be an adjustment of interest rates” confirming our assumption.
Ok, We got your clue Mr. Carney, you are ready to rise rates just want to see Brexit story spinning off a bit more to understand what it means to UK outlook 🙂
Clearly UK economy gained strong underlying growth momentum and if Brexit prepares no serious jolts for the country, incoming economic data is not expected to lag behind its current projections. Fresh BoE statement on outlook contained a jump in GDP forecast to 2.0% from 1.4%, prices growth expected to accelerate to 2.7% in Q4, far higher of 2% target.
An unpredictable distress around US Dollar created by Trump critics of “strong currency” also removes a part of headwinds for sterling growth. With Fed staying on hold bearish tone on Dollar expected to gain some traction. From the both sides the way up is open for British currency. A Number of bearish wagers on Pound has been consistently contracting since November 2016 what I see as a confirmation of my view.
A zone of 1.25-1.2550 looks like a great stage to rocket higher and I’m going to give it a try with small one lot trade. Target is somewhere near 1.27 level, Losses capped at 1.24200 area.
Long story short: Carney gives green light, buy Pound!
Feel free to leave your comments or suggestions in the comment box